The Bond Market Benefits of Corporate Social Capital

61 Pages Posted: 2 Jun 2017 Last revised: 6 Jun 2018

Hami Amiraslani

INSEAD

Karl V. Lins

University of Utah - Department of Finance

Henri Servaes

London Business School; Centre for Economic Policy Research (CEPR)

Ane Tamayo

London School of Economics & Political Science (LSE)

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2018

Abstract

We investigate whether a firm’s social capital, and the trust that it engenders, are viewed favorably by bondholders. Using firms’ corporate social responsibility (CSR) activities to proxy for social capital, we find no relation between CSR and bond spreads over the period 2005-2013. However, during the 2008-2009 financial crisis, which represents a shock to trust and default risk, high-CSR firms benefited from lower bond spreads. These effects are stronger for firms with higher expected agency costs of debt. During the crisis, high-CSR firms were also able to raise more debt at lower spreads, better credit ratings, and longer maturities.

Keywords: CSR, Social Capital, Trust, Corporate Bonds, Cost of Debt, Financial Crisis

JEL Classification: G12, G21, G32, M14

Suggested Citation

Amiraslani, Hami and Lins, Karl V. and Servaes, Henri and Tamayo, Ane Miren, The Bond Market Benefits of Corporate Social Capital (May 31, 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 535/2017. Available at SSRN: https://ssrn.com/abstract=2978794 or http://dx.doi.org/10.2139/ssrn.2978794

Hami Amiraslani

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Karl V. Lins (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-3171 (Phone)
801-581-7214 (Fax)

Henri Servaes

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
+44 20 7000 8268 (Phone)
+44 20 7000 8201 (Fax)

HOME PAGE: http://faculty.london.edu/hservaes/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ane Miren Tamayo

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 (0)20 78494689 (Phone)

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